Intelligence gathered from Investigative Due Diligence (“IDD”) can make or break a transaction. Before a typical partnership or M&A, clients will focus on several unique aspects in the due diligence process, but the three main categories are: Legal, Financial, and Investigative. Legal and Financial due diligence largely rely on documents and history provided by the target, followed by document-intensive validation. IDD does rely on records provided by the target, but focuses on intelligence gathered by investigative experts, which derive from public and proprietary sources independently. To intensify IDD, human source inquiries play a larger role. Source inquiries tend to disclose areas of potential risk that cannot be fully understood through public record research alone. Clients may choose to upgrade their IDD to include source inquires after public records showed negative or inconclusive findings. Discreet human source inquiries are often a critical, yet challenging piece of Deep-dive IDD.
Investigators leverage networks and contacts with familiarity of the target for information not in the public space. Depending on the target’s industry or jurisdiction, certain investigations may pose challenges, and privacy laws must be considered. Information gathered gives clients critical insight, and leads to further consideration or investigation based on the results of the IDD process.
Material issues uncovered include:
● Conflicts of interest
● Allegations of fraud of money laundering
● Financial issues, such as mismanagement of funds
● Regulatory breaches not in the public realm
● Potential self-dealing
● Questionable political relationships or corruption
● Undisclosed related-party transactions
● Other reputational risks
Human source intelligence can play an important role in an investor’s decision before the deal is final. These source inquiries provide color and context around the entity and key individuals. Based on information found, a client may focus more on certain aspects of their internal due diligence process, such as questioning a deal previously cleared. Successful investors will continue to undertake Deep Dive Investigations during the Due Diligence process to mitigate risk.
Increasing regulatory pressures and recent government enforcement actions call for increased knowledge about the entities firms do business with. Vcheck’s level II report, through its experienced investigators, covers deep dive investigations, including on-site visits, discreet source inquiries into business dealings, partnerships and overall reputation of individuals and companies. This allows our clients to obtain a complete picture of their subject. Highly recommended for high-risk partnerships and jurisdictions with limited information available in the public domain.
Brendan, a Certified Fraud Examiner and Certified Anti-money Laundering Specialist, has over 10 years of experience in investigations, including roles in AML compliance at a global Tier 1 bank, risk management for a leading investment advisor, intelligence analyst for a corporate investigations firm, and a fraud investigator for the Commonwealth of Massachusetts.